This survey is part of a series focusing on the financial crash of 2008 and its aftermath and other titles in the series include Opportunities in adversity: Lessons from change and Planning for growth.
Derek Engelbrecht, director: assurance at Ernst & Young, explains that in this research, over 1400 senior executives from global companies across a wide range of industries were surveyed to understand what steps they are taking to succeed as they emerge from the recession.
"Our research differentiated between companies in the top quartile in terms of EBITDA and revenue growth-the high performers-and those in the lowest quartile-the low performers," explains Engelbrecht. "This enables us to identify some of the key areas in which high performers are investing, and so give our clients a head start when it comes to formulating their own strategies."
Customer reach determines a company's ability to meet the demands of a particular market and so its growth potential. Overall, and somewhat surprisingly, the research suggested that emerging markets are not the obvious choice for growth; more than 60% said it would take more than a year to break even in such markets.
"By contrast, 45% of high performers compared reported that one of their top priorities was to focus on their most profitable customer and product segments, while 35% of low performers took this view," says Engelbrecht.
"To increase sales, high performers were more likely to introduce new products or services than low performers are, at 62% compared to 53%. They are also increasing the focus on marketing [48% as against 39 percent] and looking to execute innovative market-entry strategies [39% versus 30%]."
Operational agility determines how much of a company's customer reach is translated into sales. High performers were much more able to respond to a 25% increase in demand: 51% could do so immediately as opposed to only 37% of low performers. "The difference between the two becomes a gulf when profitability is added: 37% of high performers could meet the increased demand profitably and immediately, while only 9% low performers could do the same," he adds.
To increase speed to market, high performers have emphasised improved access to market and customer data, better project management, better understanding of and execution of strategy, better use of business intelligence and an expanded sales and marketing function, he continues. "The biggest differential was the greater reliance on alliances and partnerships by high performers [40% compared with 27%]. And when it comes to flexibility, high performers were distinguished by their relative emphasis on improving internal support functions [48% as against 35%]."
Cost competitiveness determines whether a company can meet the demand for its products and services profitably. High performers were distinguished from low performers by their greater focus on increasing staff productivity. This metric is fully 19% higher among high performers, Engelbrecht notes.
Stakeholder confidence is key to a company's ability to attract and retain the talent it needs, to sell its products and to raise capital. "High performers had a markedly reduced focus on managing their financial reputation, at 34% compared with 47% for the total sample. This implies that they are better at it and managing their reputation is therefore more assured. They also displayed more interest in improving the frequency and transparency in communicating with stakeholders and in providing additional, non-financial reporting," he says.
When it came to risk management, high performers emphasised mitigating risks associated with changing business structures and processes, anticipating regulatory changes, using bonus schemes that balance performance and risk, and considering reputational and fraud risk in global operations.
"What has emerged from this research is that there are definite and quantifiable differences in approach taken by high performers. That, in turn, provides something of a blueprint for company directors who are looking for a way out of the recession - and a way to ensure that their organizations will continue to perform in an ever more demanding market," concludes Engelbrecht.
